What Does Modern Slavery Look Like?

Modern slavery can be found in every part of our globalised world today. The International Labour Organization estimates that 40.3 million individuals are living in modern slavery, with individuals being exploited for forced labour, sexual exploitation, forced criminality, domestic servitude, and forced marriage. Countries with weak rule of law, lower economic wealth, and those affected by conflict often report higher rates of modern slavery. However, economically developed countries like Australia also play a significant role in perpetuating modern slavery. Human rights violations are taking place at an alarming rate in these countries and within their global supply chains. In this article, we take a look at modern slavery in Australia and what we can do to change things for the better.

Who are Australia’s modern slaves?

Modern slavery is often hidden in plain sight. Individuals experiencing modern slavery often work because they are being controlled, coerced or threatened and feel like they have no choice over where they work and how they live. Everyday people you may see, like backpackers, cleaners, cafe workers, and people in homes and factories, could all be experiencing slavery in one form or the other.

Estimates from Australia’s anti-slavery organisation Walk Free show that over 15000 individuals are currently experiencing slave-like conditions in Australia. Getting exact numbers is challenging as many modern slavery crimes go undetected. Reports from the Australian Federal Police indicate that no particular group or demographic is more at risk than any other. There have been cases of men, women, children, migrants, and citizens all experiencing human rights violations in some form or the other.

Abdul’s story – exploitation in the construction industry

Life in Indonesia’s construction industry is tough, with low wages and poor work conditions. Even with 15 years of experience, Abdul, a building worker, struggled to support his family. He knew he would not get better-paid work in Indonesia and saw a bleak future ahead for his children, whose education he just could not afford.

Abdul had heard that other countries offered better pay and working conditions for construction labourers. So when an international employment company visited his workplace, Abdul felt excited and hopeful. He was interviewed and offered a tradesperson job with Visa sponsorship by an Australian construction labour contractor, who promised accommodation in Canberra, decent wages, and time off on weekends. So Abdul moved to Australia hoping that he would work for a few years, earn enough to safeguard his family’s future, and then return home.

Unfortunately, the reality for Abdul was very different. He found himself living on his boss’s rural property with other foreign workers in cramped conditions. A van drove the workers to and from work each day, and they had no opportunity to leave the property at other times. Abdul worked six days a week for a measly $250. Worse, his boss deducted a further $100 for accommodation and food and to cover the cost of his weekly call to his family in Indonesia. Abdul also had to perform odd jobs on the property for no pay on his one day off.

Abdul had no access to information about working conditions and fair pay rates in Australia. There was no one he could talk to about the problems he faced at work. He was systematically isolated, exploited and taken advantage of.

Jai’s story – slavery in the food industry

Jai is a qualified chef from India who heard stories about the opportunities for a decent job and a good salary for chefs in Australia. He accepted a chef position in a Sydney restaurant with his new boss agreeing to organise his working visa and cover flight and accommodation costs. Jai was looking forward to an exciting career and improved lifestyle in Australia.

Unfortunately, that’s not how it turned out for Jai. His new boss confiscated his passport and forced him to work from 8 am until midnight with limited breaks and food. He also refused to pay Jai until he worked off the cost of the visa, flight, and board. Unfortunately, Jai was not provided with any accommodation either. Instead, his boss forced him to sleep on the premises and locked him in the storeroom every night with no bathroom facilities.

How can Australian companies prevent modern slavery?

The above incidents are not isolated cases. Even your company could be working with suppliers and smaller organisations that practice modern slavery. Some practical ways you can take action include:

Have a clear policy that states your company’s opposition to forced labour and other forms of slavery, both among suppliers and in its own operations.
Use frameworks published by the International Labour Organization to develop risk assessment criteria for your vendors and contractors.
Include clauses in your contracts with vendors and suppliers asking them to refrain from modern slavery practices and prevent it in their own supplier chain.
Find due diligence partners that can assess your vendors and suppliers with appropriate background checks and on-site visits.
Train employees on how to recognise and report modern slavery incidents they may observe while working with vendor partners.

What signs of modern slavery should your employees be looking for?

Anti-Slavery Australia is a specialist legal practice, policy, and research centre committed to abolishing modern slavery in Australia. It has published some criteria that anyone can watch for and take action to help somebody who needs it. These include:

Abusive working or living conditions.
Excessive work hours or the inability to end the employment
Living at the workplace or another place controlled by the employer
Violence, threat or coercion
Controlled freedom of movement through excessive monitoring, guarding, or confinement.
Geographic, linguistic, or social isolation.
Underpayment, no payment or other withholding of wages.
Bondage through the withholding of travel or other important documents.
Debt bondage or labour forcing as repayment or security of an inflated debt.

Conclusion:

People end up trapped in modern slavery because they are vulnerable, often as a result of poverty and exclusion. Unscrupulous groups take advantage of these external circumstances and trick people into taking risky decisions resulting in their exploitation. The Australian police are now becoming aware of the different types of forced labour and taking action. However, this can be difficult, as slavery victims are too terrified and economically disadvantaged to take legal action against perpetrators.

Hence, putting a stop to forced labour here in Australia requires workers in all professions to know what modern slavery looks like. A start has been made with the Modern Slavery Act, which requires larger companies to check their supply chains and confirm they are slavery-free. But more still needs to be done, and freeing Australia from slavery should be everyone’s business now.

Modern Slavery Exposed In Big Tech Supply Chains

Australia’s Modern Slavery Act has brought to light human rights violations hidden within the supply chains of big tech companies operating within the country. For example, tech giants Apple and Microsoft reported over 50 suppliers who did not meet compliance standards, while Amazon cited the discovery of human rights violations in 10% of their supplier base. These findings are hardly surprising, given that big tech companies have complex, global supply chains and direct connections to high-risk industries like mineral sourcing, metal refining, and electronics manufacturing. However, Australia’s ground-breaking act has brought greater transparency to the issue, obliging big tech to report findings and take more responsibility for their suppliers’ actions. This article explores modern slavery in the technology industry and steps big tech companies take to manage this risk.

Modern slavery challenges for Big Tech firms

Technology companies cite three significant challenges in slavery risk management.

Debt bonded labour

Debt-bonded labour is a form of modern slavery that occurs when a person is forced to work to repay a debt or other obligation. It can also involve withholding personal identity documents, making it impossible for the person to leave their job. Sometimes debt is incurred to get the job itself. For instance, unscrupulous recruiters charge an exorbitant “fee” to assist rural workers in finding jobs in urban areas or migrant workers to find a job in another country. Since most workers cannot afford to pay this fee, it is placed as a debt on them that they have to pay off once they get the job.

The risk of debt bondage is higher among certain groups, such as:
· Foreign and domestic migrant workers
· Agency, contract, or temporary workers
· Young or student workers
· Vulnerable populations like refugees

Big tech companies often have suppliers operating in countries associated with a higher risk for debt bonded labour, such as countries with weak labour law enforcement, large populations of migrant workers, or well-documented cases of modern slavery. Doing business with suppliers in these countries necessitates additional due diligence to ensure workers are safe.

Source: Apple

Forced labour

Forced labour is labour where workers are not compensated at fair market rates. This includes all types of labour such as indentured labour, prison labour, child labour and labour that forces hazardous conditions on workers. The term also incorporates risk of human trafficking and involuntary labour through force, threat, or fraudulent claims. For example, unscrupulous employers may coerce workers into working long hours by withholding employee identity or immigration papers (like passports, drivers’ licenses, or work permits), or confiscating, concealing, destroying, or otherwise restricting workers’ access to such documents. A cycle of fear, deception, and exploitation exacerbates matters, making it difficult for tech companies to detect when workers are being forced into labour. Labour agents frequently underreport or misrepresent employment contracts to conceal unethical practices, and workers are often afraid to make a report. As a result, tech companies have to implement several mechanisms across all levels of their supply chain to detect and respond swiftly to forced labour reports.

Source: Apple

Conflict mineral sourcing

Conflict minerals are minerals that have been sourced from politically unstable areas. In such regions, the minerals trade is often used to fuel forced labour, support corruption and money laundering, finance armed groups, and fund other human rights abuses. A very high-risk area for the tech industry is the sourcing of tin, tantalum, tungsten, and gold (called 3TG minerals) because they are commonly used in all electronic devices. There are several points in the 3TG minerals and metals supply chain, such as refining, extraction, and transportation, where money from the sale goes to armed criminals. As a result, big tech companies can inadvertently support the perpetuation of armed conflict, violence and human rights abuses in weak or unstable countries. Hence they have to conduct robust due diligence on the source and custody chain of minerals in their global supply chain.

Steps for risk mitigation

All the major big tech companies reported several actions that they are currently taking to mitigate the modern slavery risk in their supply chain. These actions can be grouped as follows.

Third-party audits

Microsoft, Apple, Facebook and Amazon all employ third-party auditors to regularly review the employment practices of their current suppliers. During this verification process, auditors examine documentation, visit production lines, dorms, canteens, and waste storage facilities, and conduct face-to-face interviews. For instance, Apple reported interviewing over 57,000 supply chain workers, and over 34,000 follow-up phone calls were made to verify zero retaliation against those workers for participating in assessment interviews.

Source: Amazon

Remediation

If audits detect nonconformances in the supply chain, big tech companies report working closely with suppliers to develop corrective action plans and resolve detected issues. Suppliers are required to implement corrective and preventative actions for all detected audit findings within specific deadlines. Failure to do can lead to termination of the relationship. For example, in 2019, Amazon’s audit revealed recruitment fee payments and passport retention issues with one supplier. Ultimately, the investigation resulted in the termination of the relationship due to the unwillingness of the supplier to engage in necessary remediation.

Responsible sourcing of materials

The big tech companies have implemented a code of conduct that requires their suppliers to source materials responsibly. Suppliers are also required to apply these requirements to their sub-contractors, third-party recruitment agencies, next-tier suppliers, and through all levels of the supply chain. For example, since 2009, Apple has directed the removal of 146 3TG smelters and refiners who did not meet Apple’s requirements for the responsible sourcing of minerals. In 2019, Microsoft expanded its work with NGO partner Pact in an effort to eradicate child labour in the mineral supply chain. Positive results have included identifying and rehabilitating 2,000 children working in mine sites.

Source: Bloomberg

Conclusion

Even though large technology companies face several challenges in eradicating modern slavery from their supply chains, they all report an ongoing commitment to doing so. To ensure that their policies and programs incorporate internationally recognized human rights standards, they engage with industry and multi-stakeholder organizations for training and other modern slavery initiatives. They also form strategic partnerships with grassroots organizations to provide immediate, direct support to potential victims. Mandatory reporting demands by governments and investors will continue to drive more and more companies to take concrete action.

3 Strategies for Company Boards to Address Modern Slavery Risks In 2022

Modern slavery is a broad term that encompasses human trafficking, forced or compulsory labour, wage theft, and child exploitation in any industry. The International Labour Organization (ILO) estimates that globally there are 89 million victims of forced labour. Approximately 50% of these are labour exploitation victims in private enterprises such as mining, agriculture, construction, manufacturing, and utilities. While Australia is committed to combating modern slavery, globalisation increases the challenges. For example, we do not want products that have benefited from slavery in their manufacturing process overseas to be sold in Australia.

To tackle this issue, the Australian government passed the Modern Slavery Act 2018, which now imposes mandatory reporting requirements on all companies with annual revenue over $100 million. However, as the Monash Centre for Financial Studies research reveals, legislation alone does not ensure universally high compliance standards. More than a third of the submitted reports received a fail score when assessed on several different criteria such as due diligence, slavery risk assessment and risk training. This is alarming and indicates that Australian companies do not fully understand the modern slavery risks in their supply chains and operations.

Company leaders need to proactively implement modern slavery risk management strategies to see a significant impact on the issue. Here are three ways company boards can strengthen their commitment and improve compliance for 2022.

Implement policies and procedures to manage modern slavery risks

Company boards can implement a risk management program that demonstrates their commitment to human rights to shareholders and customers. Just words are not enough – the commitment should reflect in all company operations and levels. This could include the establishment of a project team that manages and is accountable for  the organisation’s anti-slavery strategy. They can work together with the team to:

Set yearly program goals

Establishing a baseline and setting goals are key components of an effective modern slavery risk management program. Plans should include action items around:

Employee training
Supplier review process
Onboarding new suppliers
Logistics review process

Map the existing supply chain

While most company boards are familiar with their first-tier suppliers, they  often have very little or no visibility with regards to their tier 2 and beyond suppliers. Modern slavery risk typically increases exponentially towards the end of the supply chain – especially with contractors that work directly in sourcing raw material and manufacturing essential components. Over time the objective has to include transparency and visibility across the entire supply chain with an emphasis on the higher risk components.

Review existing processes

A diligent review of existing policies and procedures is necessary to find gaps and address them. The team can close legal loopholes and increase transparency in all dealings with external third parties. A review also helps implement more practical policies that enforce human rights and human safety. For example, suppose the risk management team finds that suppliers are unwilling to report or address human rights issues. In that case, they may decide to update supplier contracts that enforce specific terms and codes of conduct.

Implement modern slavery report and response mechanisms

Company boards can implement a communication plan for reporting and resolving any modern slavery incidents. The plan can include action items such as:

Content of the report
Reporting channel
Who can make the report?
How is the report verified?
Who actions the report?

Relevant stakeholders in the business should be familiar with the communication plan and be adequately trained to respond appropriately to the slavery incident. The company’s response mechanism should take into account the following factors:

Needs of the victims

The victim’s safety should be the top priority in any response. Depending on the location of the incident, it could be a serious crime that requires the company to follow specific jurisdictional requirements. The legal team should be equipped to handle this without further harming the victims.

Compensation

Companies may be legally obliged to compensate the victims or ensure they receive appropriate compensation from their owned or controlled entities. Efforts should be made to expedite the compensation process and ensure it reaches the affected individuals in full. Doing so can protect the company from further legal and reputational harm.

Communication

A solid internal and external communication policy about modern slavery incidents allows the company to take control of the dialogue and prevent reputational damage. The policy ensures that all communication is transparent, prompt and sensitively addressed. It is best to keep the message focused on remedying the situation and preventing future harm.

Implement monitoring mechanisms for existing modern slavery risk management policies

Finding meaningful methods to monitor the effectiveness of a company’s modern slavery risk management policies can be challenging. However, not doing so can render them meaningless. For example, a company board might implement the policy that all suppliers must pay fair wages to all their employees. However, if the supplier gets away without submitting or submitting fake reports, the policy is ineffective. Every policy must include mechanisms to verify policy compliance. Below are some suggestions

Adopt appropriate KPIs

The setting key performance indicators with appropriate metrics to review policy compliance. Example metrics include:

Employee training completion rate
Supplier compliance scores
Percentage of suppliers above a certain score threshold
Year on year improvement in supplier performance

Using data and trends to measure performance can help company boards keep track of their progress and measure social impact. They can report positive KPIs to customers and shareholders to increase goodwill and continue implementing new policies where KPIs are low.

Ongoing stakeholder engagement

Company leadership should engage with internal and external stakeholders to receive first-hand feedback on the policies they implement. By talking directly to the people involved, company boards can improve their modern slavery risk management processes while also becoming aware of new risks in the ever-changing slavery landscape. For example, internal teams might be experiencing increasing workloads for modern slavery policy compliance without understanding its impact. Or they might require additional tools and technology to implement the policies more effectively at the grassroots level.

The three strategies outlined above will help company boards to address their slavery risks more effectively going forward and thus help improve the quality and content of the mandatory annual statement. Leading global research firm Gartner highlights here that the diverse range of approaches to responsible sourcing can “make things confusing”, and given that businesses don’t operate with unlimited resources, the key to responsible sourcing is asking yourself “what should we focus on”? Prioritisation is key – prioritising suppliers by risk or impact, to act where it matters the most.

Murky waters: what lurks in the depths of Australian supply chains?

A lot seems to be happening around the world to combat modern slavery. The UN Sustainable Development Goals include Target 8.7, which commits to taking “immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking”, including putting an end to child labour by 2025. Here in Australia, we’ve passed legislation in 2019 requiring large companies to demonstrate that they are taking reasonable steps to combat slavery by lodging Modern Slavery Statements; in doing so, we’ve joined a handful of nations around the world including the UK, France and the Netherlands.

But despite good intentions and well-meaning policies, modern slavery has only grown since the Sustainable Development Goals were announced back in 2015; in fact, far from child labour being abolished, UNICEF estimates that 8.4 million more children have become enslaved in the last four years. COVID-19 has made more and more people vulnerable to slavery, while heightening risks for people already exploited, while disrupting response efforts in turn. At the same time, climate change and modern slavery form a vicious, mutually-reinforcing cycle, where climate change leads to an increase in modern slavery, and many of those slaves are forced to do work that causes environmental harm.

So, where does Australia fit in? What role do Australian businesses have to play in combating modern slavery, and are our large companies delivering on their commitments?

Australia’s links to modern slavery

Firstly, it’s important to note that while Australia does have modern slavery on its shores, our greatest link to modern slavery lies in our imports. The APAC region, by far our largest trading partner, is home to two-thirds of the world’s slaves. The Global Slavery Index estimates that 24 million of the world’s 40 million slaves live in the APAC Region. With an estimated $12 billion worth of goods sold in Australia each year being at risk of connection to modern slavery, it’s almost a certainty that the average Australian consumer owns or consumes products that are linked to modern slavery; in particular, computers, mobile phones, and agricultural products. Furthermore, there is significant scope for modern slavery exposure in the supply chains of many large Australian companies. And while some industries are more high-risk than others, modern slavery can show up in many unexpected places as well.

The Modern Slavery Act: an exercise in box-ticking?

In 2019, Australia passed the Modern Slavery Act (MSA), requiring reporting entities (particularly, companies with $100m+ revenue) to lodge Modern Slavery Statements describing the due diligence they have conducted regarding potential risks of exploitation in their supply chains, including how they have assessed such risks, their remediation processes and so on. However, key criticisms of the Act include a lack of penalties for non-compliance, with critics highlighting that non-compliance with other corporate laws results in penalties. An analysis by human rights lawyer and activist Dr Vijeyarasa, published in the Adelaide Law Review¹, finds a significant gap between the opinions expressed in submissions to the Parliament of Australia during the drafting process and the final Commonwealth law, with “a surprising disregard for the majority of submissions made to the Australian Joint Standing Committee on Foreign Affairs, Defence and Trade”; this analysis identifies several alternatives to what the Act looks like now, including that Parliament could have considered a risk-based approach for companies within a lower turnover bracket, forcing them to assess their exposure to exploitative supply chains.

Dr. Vijeyarasa finds “the architecture of the law has shifted the burden of determining if a human rights violation has taken place from government to businesses. For this to work, it must be accompanied by strong incentives to ensure such due diligence is adequate and that businesses respond to the outcomes of investigations. Yet, the Australian sanctions are weak at best.”

As a result, the MSA has been criticised as only targeting a fraction of Australian businesses, relying on ‘tick-a-box’ reporting mechanisms and not requiring the creation of an independent commissioner to ensure compliance².

Furthermore, the COVID-19 pandemic has significantly increased modern slavery, worsening modern slavery risk exposure in turn. Companies should be acting now to ensure that they have robust strategies and measures in place, not only to tick the MSA boxes, but to ensure that they are taking proactive steps to go above and beyond the minimum requirements of the MSA. The ethical implications of profiting from modern slavery are of course reason enough to take action; but the reputational and potential legal risks to companies with proven links to modern slavery should not be underestimated.

Modern slavery in the ASX100?

While modern slavery is often thought of an overseas problem that Australia is only linked to through imports, the risks of modern slavery on our shores should not be forgotten; the Global Slavery Index estimates that at least 15,000 people live in modern slavery conditions in Australia. A recent analysis by the Australasian Centre for Corporate Responsibility finds that ASX100 companies are only reporting to shareholders and the public about their direct employees, while information about their ‘indirect’ workforces remains unknown; of the companies analysed, 42% made no material disclosure about their labour hire and/or contracting workforce in annual reporting documents. There is evidence that the use of labour hire introduces significant risks, include involvement in modern slavery, labour exploitation and theft; this data gap can put ASX100 companies at risk of perpetuating modern slavery in their domestic supply chains.

Furthermore, Monash University’s Monash Centre for Financial Studies has conducted an analysis of the ASX100’s Modern Slavery Statements, which find a wide dispersion in terms of the disclosure quality of the Modern Slavery Statements submitted in 2020; their report can be found here, including recommendations to companies, investors and government. Notably, the Centre recommends that companies collaborate with peers to maximise effectiveness, focus time and resources on areas of possible influence rather than areas of general concerns, and engage and educate suppliers. Similarly, analysis of 121 modern slavery statements submitted found that only 8% of reporting entities went beyond their Tier 1 (direct) suppliers, leaving them open to litigation (AFR).

Modern slavery is a complex problem, requiring many actors to work together effectively for better outcomes. For the most part, it is an illegal activity wherever it is being conducted, and significant efforts are taken to ensure that it remains an invisible one, further complicating the issue – how do you solve something that you cannot see? Fortunately, a significant emerging body of best-practice does exist; from working with modern slavery experts, to leveraging the power of data, to working together collaboratively across your industry to share knowledge rather than reinventing the wheel.

The power of data to combat modern slavery

Taking effective steps to combat modern slavery is often put in the too-hard basket, even by large companies with legislative obligations. Collaborating with your competitors isn’t something that comes naturally; most companies won’t have in-house expertise on modern slavery; and it’s hard to even know where to start. Unfortunately, this can and does lead to ineffective strategies and bare-minimum disclosure.

Data management and collaboration must both form key components of a modern slavery strategy. Here at Informed 365, we assist thousands of Australian businesses and consortia to manage their data more effectively, understand their risk exposure and work together towards combating modern slavery. Our work with the Property Council of Australia is an excellent exemplar of how companies can band together to do better; their collaborative platform powered by Informed 365 captures tens of thousands of suppliers and billions of dollars in annual procurement spend, providing a customizable framework including supplier questionnaires, risk analysis and more.

“Our strong intention is to create resources that are open-source for the entire sector, and that remove the barriers for suppliers to engage with our members on these issues. It is for that reason that the supplier questionnaire developed for this platform will be freely available for anyone to use, and it will be free for suppliers to log into the platform and provide responses to these questions. By only answering these questions once on the platform, we are also streamlining the reporting burden on our supply chain, a critical component of this initiative” – Frankie Muskovic, National Policy Manager, Property Council of Australia³

Informed 365’s platform enables at-a-glance and in-depth analysis, tracking, reporting, and predictive analytics. We enable organisations to protect their brand reputation, efficiently manage and monitor suppliers in real-time, meet and exceed government and consumer standards, and better understand and manage their supply chain.

As Australia’s leading data management tool for combating modern slavery, we’d love to demonstrate to your company the power of our platform to make better-informed ESG & CSR decisions. Get in touch today for a free demo and to understand how we can work with you to ensure your modern slavery commitments are much more than a box-ticking exercise.

Wy proactive ESG needs strategy

With so many companies gaining a marketing boost from “greenwashing” without practicing what they preach, consumers and investors have become increasingly skeptical of lofty Environmental, Social, and Governance (ESG) commitments that turn out to have little to do with what’s happening on the ground. We’ve seen some high-profile cases of this in recent years. For example, the 2015 “Dieselgate” scandal, where Volkswagen admitted that 11 million of its vehicles were equipped with software used to cheat on emissions tests, is an example of an environment failure reinforced by poor governance. Facebook’s misuse of data also springs to mind as a governance-related scandal with significant social implications.

There’s a clear argument for running business in a way that’s environmentally sustainable and treats people with respect, not only in terms of the ethical ramifications of doing otherwise, but both the commercial and legal implications. Yet ESG doesn’t just happen in a vacuum; it is far too easy to remain ignorant of harm done when businesses do not carefully monitor, measure and evaluate their impacts. For example, here at Informed 365 we have written widely on the high level of modern slavery risk exposure experienced by Australian businesses given our extensive trade ties with the APAC region (where most modern slavery occurs); forced labour being illegal in every country in the world besides North Korea, yet there are more slaves living now than any other time in history, and the odds are that some of the products in the average Australian shopping basket will be produced by slaves.

The ESG investment market has grown exponentially in recent years, and most shoppers are willing to change their shopping habits to reduce environmental impact (and are willing to pay a significant premium for environmentally responsible, sustainable brands). This makes it sorely tempting for companies to cash in on the goodwill of socially-minded consumers and investors, giving rise to the greenwashing phenomenon; and sadly, many businesses will focus more on the brand value than delivering true ESG (despite the proven value-creation benefits of ESG).

On the other hand, companies that do wish to offer truly sustainable and ethical choices may struggle to do so – particularly at the point of getting started. How do you know whether your supply chain is ethical? How do you measure your environmental impact, and find opportunities to improve upon it? How can you use the knowledge, skills and abilities of your people for social benefit? When we’re used to measuring our successes by a dollar value, this can be quite a mindset shift, especially given how different ESG factors may look in your business compared to in another industry (or even another business within your industry).

For ESG to be effective, rather than ad-hoc, you need a well-defined and holistic strategy. ESG must be intrinsic to the values of your organisation, and guide the decisions you’re making every day; rather than an afterthought or a box to tick.

Environmental, Social and Governance

So, what could this look like? Firstly, let’s break ESG down into its core components: environmental, social and governance.

Setting your ESG strategy will require exploring your business’ value chain to find where opportunities for change lie across all three of these domains. Some questions to consider:

Environmental:

How does your company perform as a steward of the physical environment. What impacts do your policies and practices have on the environment (i.e. utilisation of natural resources, effect of operations)?

Social:

How can your company manage its relationships with its workforce, the societies in which it operates, and the political environment? (i.e. dealing with social trends, labor, and politics)

Governance:

What framework lies behind your decision-making processes? (i.e. how policies are made, and which stakeholders have what distribution of rights and responsibilities)

(Adapted from S&P Global)

There is no one accepted framework for ESG or sustainability (although this is in the works) which makes it difficult to compare one company to another – this is particularly important from the perspective of consumers seeking to dollar vote, and investors seeking to gain a realistic picture of where you stand as a sustainable business. Furthermore, the impact of your business and industry can be complex: for example, the UNDP identifies major issues for mining across 17 of the Sustainable Development Goals:

Source: UNDP: Extracting Good Practices

However, there are many excellent consultants and tools out there to make it easier to formulating and implement a robust strategy; for example, the Global Reporting Initiative (GRI) was developed way back in 1997 to create an accountability framework for companies to display to their stakeholders their responsible environmental business practices and is still in common use today with 10,000 GRI reporters in 100 countries, and 80% of the world’s 250 largest companies issue Corporate Social Responsibility (CSR) reports in alignment with GRI standards.

By identifying opportunities to break free of siloes and building on what already exists means you can avoid reinventing the wheel; in particular, sector collaboration offers great promise for knowledge-sharing, helping you to contribute to mapping ESG risk in your industry (while reaping the benefit of what’s already out there). This is a bit of a mindset shift from how business is usually done – keeping your trade secrets a secret – but especially where complex supply chains are involved, working together is key to ensure that what you do really is effective.

Success Story: Property Council of Australia

The Property Council of Australia recognises that the high risk of modern slavery in the construction industry in Australia needs to be addressed collaboratively.

They’re now utilising a bespoke supplier platform for modern slavery reporting, powered by Informed 365, capturing tens of thousands of suppliers and billions of dollars in annual procurement spend. This platform includes pre-qualification supplier questionnaires and a risk assessment matrix, helping businesses understand their risk exposure at an overarching level while also identifying suppliers that do not meet criteria.

As a result, modern slavery reporting entities (large companies with consolidated revenue of at least $100 million) are better equipped to deliver and report upon their obligations under the Modern Slavery Act; and as a trickle-down effect, smaller construction companies supplying to these companies become more aware of their own obligations and are building their capacity to combat modern slavery both in their own right as a Tier 1 supplier, and among their own suppliers.

Of course, it’s particularly important that you start this process at the strategic planning stage; these tools, frameworks and consultants have the expertise can help you identify meaningful opportunities to reduce ESG risk and be a business that you, your employees, your investors and your customers are proud of.

When chocolate isn’t so sweet: modern slavery and child labour in the cocoa industry

As the cooler months set in, many of us curl up with those warming cups of hot choc, but arguably most of us don’t think of the supply chain of this ubiquitous treat. Modern slavery and child labour often feels like problems happening overseas; however, the end results can be found in everyday consumer products on Australian supermarket shelves, and pantries across the country. Every year, we import almost $1 billion of cocoa and cocoa products, and the average Aussie consumes 5kg of chocolate; while the slavery in cocoa supply chains is mostly happening outside our borders, we’re certainly complicit in it.

Of course, the extent of slavery in cocoa supply chains isn’t obvious at first glance; it’s hardly going to be found on a label. Individual consumers operate with limited information. Modern slavery and child labour both lurk in the shadows, generally deep into supply chains that remain unmapped and unknown even by the Australian food businesses producing chocolate products. However, where this status quo is left unchecked, it represents potentially massive human rights violations. much as possible.

Human rights violations in the cocoa industry

Where does responsibility lie in this matter? This is a complex question with no single answer. Regardless of good intent, consumers will generally have little idea of what the supply chain looks like, and often have little ability to make better choices. Consumers widely agree that they would pay more for an ethically-sourced product, but where are those products? Companies like Nestle have pledged to eradicate child labour in their supply chains, but as we’ve seen from high-profile litigation, their supply chains have also been contaminated. Not in an office here in Australia, but in faraway cocoa farms in the developing world. Whether they have taken reasonable steps to avoid child labour in their supply chains is up for debate – and is currently being debated in a landmark child slavery lawsuit in the US. Nestle can only trace 49 percent of its global cocoa supply to farms; Mars can trace a mere 24 percent. If chocolate manufacturers do not know where their chocolate is coming from, how can consumers?

Roughly two-thirds of the world’s cocoa supply comes from West Africa, where at least 2 million children are engaged in dangerous labour in cocoa-growing regions. Many of these child labourers are working on farms owned by their parents, a human rights violation in of itself; furthermore, a significant number of adults and children as young as 5 are trafficked to work in the cocoa fields, experiencing horrific conditions and abuse. The odds are that the chocolate bars we buy in our supermarkets are tainted by child labour and/or modern slavery, because by the time one reaches those cocoa farms, these practices are so very pervasive.

Cocoa industry has “the power to end child labour and slave labour”

The Food Empowerment project argues that “despite their role in contributing to child labour, slavery, and human trafficking, the chocolate industry has not taken significant steps to remedy the problem… within their $60-billion industry, chocolate companies have the power to end the use of child labour and slave labour by paying cocoa farmers a living wage for their product.” Certified chocolates offer a somewhat better, but still limited alternative, with three nonprofit groups — Fairtrade, Utz and Rainforest Alliance — providing labels to products that have been produced according to their ethical standards, including a prohibition on child labour. However, third-party inspectors are required to visit fewer than 10 percent of cocoa farms (Washington Post). This isn’t to say that these groups aren’t doing significant work in improving the lives of cocoa industry workers, particularly by ensuring that producers are paid fairly for this commodity. On average, cocoa farmers earn less than $2 per day, an income below the poverty line, and often resort to the use of child labour to keep their prices competitive (Food Empowerment Project); paying fair prices to cocoa farmers reduces these pressures, but does not necessarily guarantee that these benefits are passed on to the workers. As such, more needs to be done at an industry level not only to further empower these organisations, but to prevent adults and children alike from slipping through the cracks.

“We haven’t eradicated child labor because no one has been forced to. What has been the consequence . . . for not meeting the goals? How many fines did they face? How many prison sentences? None. There has been zero consequence.” – Antonie Fountain, managing director of the Voice Network

The cocoa industry certainly leaves a bitter taste: this is a well-known high-risk industry for modern slavery, including child labour, which has attracted international condemnation for decades for harmful practices. The industry itself is widely considered to not be doing enough to prevent child labour and modern slavery, with some of the largest companies in the world purchasing cocoa from markets where child labour and slavery remain rife; in particular, a recent report by Macquarie University has revealed that major chocolate producers including Nestle, Hershey, Mondelez (which owns Cadbury) and Mars are still sourcing cocoa from the Ivory Coast.

“Nestle and the other industry players have not resolved the issue. They are overstating good news and understating bad news.” – Professor John Dumay, Macquarie University (The New Daily: Child slavery: Why your choice in chocolate could be harming children)

The report finds that “large companies may create the impression they are doing the right thing by workers and the environment when in fact their businesses may be involved in exploitative and harmful practices”; marketing messages of these large companies may be quite different from on-the-ground realities. Australian consumers can to some extent dollar-vote by choosing certified chocolates, but this remains far from perfect; real change needs to happen at an industry level. Furthermore, companies dealing with cocoa must tread with care to avoid being complicit in these practices, to avoid not only ethical and reputational risk, but also risk of litigation.

Australia’s Modern Slavery Act

Government policies worldwide are increasingly compelling businesses to take reasonable steps to prevent modern slavery in their supply chains, including Australia’s Modern Slavery Act which requires large companies both to take these reasonable steps and report on these efforts. While smaller companies are not subject to the same stringent reporting requirements, the choices that they make in where they source their cocoa and chocolate remain invaluable in pressing for change in the industry by creating demand for certified products. However, the most important changes must happen at the top. Ethical sourcing is best achieved through collaborative efforts and knowledge-sharing, commitment to meaningful change, and optimal use of expertise, data and partnerships at an industry level.

Ethical sourcing collaboration, powered by tech

By way of example, the Australian Property Council is leading a collaborative group of the 17 largest property companies in developing a tech platform powered by Informed 365, that gathers and collates information from industry suppliers on their modern slavery exposures in operations and supply chain. The companies use our platform to more effectively map complex, multinational supply chains. The platform also empowers suppliers to assess their risk exposure as well as managing and monitoring processes. You can find more information on that project here. Coordinated, collaborative efforts such as these have proven effective across many industries, enabling the best possible approaches to the complex and opaque problems of modern slavery and child labour.

Furthermore, the clarion call for stronger penalties for modern slavery and child labour in supply chains is louder than ever, with many calling for government intervention – for example, more robust modern slavery legislation.

Nothing changes if nothing changes

The international cocoa industry is still going strong despite enormous human rights violations that have been known for at least a century, since William Cadbury first sent Dr. Joseph Burtt to investigate conditions on the cocoa plantations of on the islands of São Tomé and Principe. As Albert Einstein’s famous quip put it, “insanity is doing the same thing over and over again expecting different results”; nothing changes if nothing changes, and where pleading ignorance is enough to avoid consequences, it seems unlikely that much will. As such, many anti-slavery activists are watching the Nestle and Cargills cases closely; these landmark cases may perhaps finally lead to change.

But in the meanwhile, while children grow up in conditions unimaginable to Australian families, the onus is on Australian companies dealing with cocoa to make more ethical choices; while Australian consumers can avoid taking claims of ethical sourcing at face value and dollar-vote with care as they grow the demand for certified cocoa, and the capacity of certification bodies to do their work better in turn.

From fashion to fish, chocolate to construction, many sectors that Australians companies work within are exposed to modern slavery. Explore issues pertaining to modern slavery, ethical sourcing and supply chain management at the Informed 365 blog; and to learn more about how we empower companies in Australia and beyond towards better supply chain management & modern slavery reporting, and turn their ESG and CSR commitments into practice, contact us.